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4 comments on Oil breaks $100, hits new all-time high
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They're not calling it a "recession" in the US just yet; or rather they're saying they might get one, but not just yet. I'm not sure exactly what the time frame is supposed to be - could you come to your office from lunch and the recession started? Back from a weekend away? After a month? Or what? How long does it take to happen, and how long must we have bad news before we say we're in a "recession"?
The demand for oil is considerably higher than production, so even with a US recession oil prices will continue to rise. $180 a barrel before the end of the year, I say ;) Rather than high oil prices happening despite the US recession, I reckon we'll see the US recession made certain by high oil prices.
Edit: oh, and the reason Tapis is more than WTI is that in the last year or two the US has had a lot of problems with its refineries. So they couldn't guarantee supply. Obviously if you're buying futures then you're not so keen on ones with... well, less of a future.
That post was a joint effort from Phil and I - I wouldn't technically class the US as being in recession (yet).
I think the official definition is negative growth for 2 consecutive quarters.
I don't understand your comment about WTI and refineries. Do you mean that WTI sells for less because the demand (from US refineries) has been lower than expected ? I thought it was partly a quality issue - Tapis is lighter / sweeter than WTI...
Tapis is slightly lighter and sweeter than WTI, but that's not most of the price difference we've been seeing.
It's simply that with several US refineries down, there's been less West Texas Intermediate actually on the market. The Texan oil producers send their crude to those US refineries - but they couldn't refine it so it just stayed in the ground for a bit, Texan production was down. Some gets sent overseas for refining, but the transport of it adds to the costs. When this was going to change was not perfectly knowable, you never know with big machines like refineries. So the future ability of WTI producers to be able to have their stuff refined and turned into something actually useful (unlike crude itself) was uncertain. Thus the futures sold for less.
Whereas Tapis has kept flowing into and out of the various refineries - including one at Geelong where a mate of mine works.